Proceedings of the National Conference on

Trends and Advances in Mechanical Engineering,

YMCA Institute of Engineering, Faridabad, Haryana.., Dec 9-10, 2006.

ORGANIZATIONAL DOWNSIZING USING LEAN MANUFACTURING

WITH IMPLEMENTATION ON REAL LIFE OPERATIONS.
Anil Shastree1, S A Arundhati2
1
Department of Mechanical Engineering ,Professor ,A D Patel Institute of Technology,
New V V Nagar,388121 Gujarat
2
Company Secretary,Narmada Chematur Petro-Chemicals Limited,Bharuch,392015 Gujarat
1, 2
Email: anilshastree@yahoo.com , arundhati_shastree@yahoo.co.uk

Abstract
Lean manufacturing can be symbolized by transparent ball- the spirit of challenge and the challenge of change.
Avoiding waste is the theme. The essence of "lean" is to compress time from the receipt of an order all the way
through to the receipt of payment. Shortening cycle by properly aligning all steps in the activity reduces waste and
brings improvement. As enterprises have reduced costs and improved quality, the primary competitive measure is
the ability to respond to the customer. This directly makes the organization cost conscious. It also helps in
becoming customer focused. It is a team oriented approach. Effective communication, flexibility, standardization etc
are the accrued benefits of lean manufacturing.

The paper discusses the concept of lean as applied to Indian organization and the issues there off in lean
manufacturing, This paper guides through Lean Manufacturing concepts and helps to introduce methods and tools
designed to put these concepts to work in a manufacturing environment ; after effect of this strategy - down sizing
and its effects are explained. The rules for success of lean and its improvements as experienced by authors are
explained.

The paper concludes by giving the details of the live case study in which authors have participated and their
experiences about lean implementation. No doubt lean is a strategic tool for competitiveness and down sizing is the
effect of strategy decision implementation. Essentially, effects of lean should be accompanied by trust and
motivational leadership

Key Words: Lean, Lean Organization, Down Sizing, Experiences With Lean Implementation, Areas For Lean
Working .

1.0 Introduction
Organization size reduction strategy is an accepted practice for improving the performance and for bringing change.
By eliminating unnecessary steps, aligning all steps in an activity in a continuous flow, recombining labour into
cross functional team dedicated to that activity and continually striving for improvement , companies can develop,
produce and distribute products half or less of the human effort, space, tools, time and overall expense. They have
also become vastly more flexible and responsive to customer desires. Avoiding waste is the theme. It is necessary to
have the existing knowledge base if new organizational model is to be made-the model is “LEAN ENTERPRISE”.
Lean production tightly integrates product design, supply and distribution, manufacturing accounting, marketing and
management. An ideal lean manufacturing system consists of all the parties within the extended manufacturing
enterprise sharing information and resources in team oriented ,multifunctional, environment.(European automotive
initiative group –EAIG) In short, a lean enterprise is an integrated entity which efficiently creates value for its
multiple stakeholders by employing lean principles and practices(Lean Initiative Aerospace, MIT) If properly
implemented, lean manufacturing leads to knowledge and not just information of numbers. It is an approach road to
organizational learning. It leads to the best alternative under existing situation. It is reframing the existing set up and
revalidating the business assumptions. It means training an employee to be employable. Of course, there is change in
mind set and attitudes. It is necessary to accrue the benefits and effectively manage the negative consequences. In
lean manufacturing, the process is that of “doing it right at the first time”. It is actually changing the way one thinks
about manufacturing. That can be a tough shift to make. No wonder there is thinking and rethinking process leading
to the path of simplification, standardization, relearning and unlearning. Lean is doing the thing with. CHANGE.
Change is not easy. It takes lots of work, dedication, desire to change and above all commitment to change. Change
means gaining in depth understanding of the dynamics. It is the effective management .It is an organizational
learning. It is change management. It also offers knowledge base and understanding of the turbulence in the market

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place. It is not myopic research but a strategy for survival for gaining sustainable advantage. It is the accumulated
knowledge churned out from experience Accumulated knowledge provides the basis for creating further knowledge,
at the core is the corporate renewal package rather than the isolated strategy on its own. It is like providing the fresh
look at the traditional ways of conducting existing business. Often companies see bucks in rejuvenating and
reinventing old products and gets through LEAN. In principle, down sizing means reducing head count. This
usually means managing the potential and negative consequences keeping in mind the expectations that
organizations have from down sizing. Adopting the proper strategies for successful downsizing is essential.

2.0 Understanding Lean

James P Womack, Daniel T Jones and Roods D in their book” The Machine that Changed the World: The Story of
Lean Production. New York: Harper Collins Publishers (1990) explained how companies can eliminate unnecessary
steps and by continually striving for improvement can develop, produce and distribute products with half or less of
human effort, space, tools and over all expense. Toyota implemented the system in true spirit. They have since built
their reputation as quality leaders and boast one of the fastest growing market shares in the automotive industry. The
theme that stands out is REDUCE CYCLE TIME. Commonly, understanding the concept of lean manufacturing
leads to many more opportunities; no doubt the processing time is very small portion of the cycle time. Obviously,
benefit of shorter cycle time is the reduced lead-time that gives the competitive edge and reduction in the cost.
Companies need two systems:
1) To run the business and
2) To develop new ideas.
Managers will have to concentrate on the performance of the enterprise rather than on the performance of the
individual, functions and companies. Some organizational benefits expected from down sizing includes increase in
productivity, improved quality, sustainable competitive advantage and above all standing firm in the future
competition. Knowledge is the primary resource for individual and for organization overall. Specialized knowledge
by itself produces nothing. It can become productive only when it is integrated into a task. The purpose and function
of every organization business and non business alike, is the integration of specialized knowledge into a common
task.

The issues involved to become a world trend setter by lean manufacturing are:
1. Lean supply network
2. Lean organization
3. Lean distribution customer service
4. Lean product development
5. Lean accounting
6. Lean information management
7. Lean manufacturing
8. Lean quality management
With Lean thinking at the core (Figure 1)

These results in
1. Converting inventory into cash faster
2. Maintaining less inventory by producing the product faster
3. Less expediting due to proper inventory levels
4. Decreased order processing costs as fever orders are being tracked simultaneously
5. Decreased processing time due to altered focus of entire team
6. Removing non-value addition (waste) - the first step for reducing the cycle time.

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 Proceedings of the National Conference on
Trends and Advances in Mechanical Engineering,
YMCA Institute of Engineering, Faridabad, Haryana.., Dec 9-10, 2006.

Source: Lean Sigma institute Figure 1

In other words, it is the increase in the worth of the organization for sustainable advantage in competitive world.
Obviously, there is a pride to boost about.

3.0 Indian Scenario

In India, the story of the revival of Indian manufacturing is unfolding. Latest data from IIP reveals, manufacturing
grew 8.2% in last quarter and nearly 10% in April-August ’05 since then there is no back track. Indian
manufacturing is gaining from a clear focus on key parameter like operating cost, efficiency and innovation. Fuel
and power a critical and neglected input were among the first targets. Fuel and power expenses vis-a- vis sales of ten
sectors within manufacturing between FY00 to FY05 shows that while sales have grown at a CAGR of 11.5%,
power and fuel expenses have grown at 7.3% only. This is despite a substantial rise in fuel prices during this period
but for which the results would have been even more pronounced. Chemicals and steel for which fuel costs are a
significant part of total cost of production have brought down the fuel/sales ratio by 4.2% and 2.8% respectively.
Working capital hitherto not thought of as a cost cutting tool has gained prominence. For sample of 43 large
companies with annual sales more than 1000 Crores the working capital/sales ratio has come down from 12.1% in
1995 to 5.6% in 2005. The total sales for these companies in FY05 was Rs. 6300 Crores .At a 10% interest rate for
short term borrowing, this corresponds to a saving of more than Rs. 4000Crores annually. Indian manufacturing is
also leveraging innovation using it to push the envelope on operational efficiencies. The greatest contribution of
innovation to Indian manufacturing is faster products development ,smart supply chain, and deployment of lean
manufacturing for dynamic production and supply of customized product- all these aided by deployment of IT
applications.Reduction in lead time for new product development has come down by as much as 50% in last three
years. As enterprises have reduced costs and improved quality, the primary competitive measure is the ability to
respond to the customer. The essence of "lean" is to compress time from the receipt of an order all the way through
to the receipt of payment. Down sizing is common for economically viable and financially sound organizations.
Many Indian companies have down sized during the period of 1995-2000 and are again on the growth path at
present.

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Some of the issues which were addressed for down sizing through lean were:
1. Organizational size for the product/s on International basis.
2. Employee compensation level for product realization in the competitive market
3. Employee – orientation and attitude towards the organization, Industrial relations
4. Vision of the leader of the group in the midst of competition
5. Product innovativeness and knowledge update of the individual
6. Shift from manual to automation.
7. Overall strategy for organizational renewal and developing culture of continuous monitoring, developing core
competencies and analyzing fit with present reality
8. Correcting the errors in reading the market by the top management.

4.0 Sharing Experience

4.1 Downsizing
Experience clearly indicates that technological advances coupled with globalization are the main reasons. It is the
desire to survive in global competition. The service sectors are fast moving forward and India is called the hub of
service sector and global benchmarking with competitors in terms of overhead costs are some of the reasons for
reorganization through lean. Lean is the cause and down sizing is the effect. It is not necessary the every time there
is gain, financial in particular, giving advantage through down sizing but lean leads to survival strategy. They are
different. Lean continues to be a tool for competitiveness while down sizing remains a strategy of reorganization.
The negative consequences are basically demoralizing all employees but ones the mind set up is achieved, the
ingenious human brain participates in the reorganization creatively. It is an experience by itself.

4.2 Approaching lean implementation

In Indian context, Lean enterprise is unified by shared logic, shared pains and gains. It is not the individual
becoming lean but it is essential that all members of the value stream pull together to maintain the momentum. Thus
team based culture promotes employees accountability and responsibility at work .It is a process of empowerment.
This is the main step to start. Making every one to think in terms of value stream is critical step. This always runs
into stiff resistance from almost every employee, as having minimum job is the requirement for the self respect and
financial well being. Making any process lean creates large number of excess workers and then continually reduces
the amount of effort needed, the job problem is the major obstacle confronting the enterprise to make a performance
leap and then sustain momentum. The next stage is the career i.e. the courage to say that “we are developing our
abilities and going somewhere”. Lean does not explicitly prescribe the culture and infrastructure needed to achieve
and sustain results. Lean claims that process redesign is always required to some extent to eliminate non value added
activity as cycle efficiency is usually low. Thus strong leadership is the pillar. It sets the standard for the
organization and communication system that encourages on the spot decision making process to resolve the issues.
(Figure2)
Figure2

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 Proceedings of the National Conference on
Trends and Advances in Mechanical Engineering,
YMCA Institute of Engineering, Faridabad, Haryana.., Dec 9-10, 2006.

5.0 Response of Indian Enterprises

Some of the Indian companies have had pursued every option for preserving jobs of the employees as they created
lean enterprises .They had drawn the code of conduct to keep the established culture by founders. Cold war like
relations prevails in most of the value chain during initial stage. Lower morale, depression, lack of focus and loss of
productivity are some of the negative effects. Increased stress, guilt feeling, fear of future and demotivation is
always present for fairly long time amongst the survivors. It was also observed that there was no belief on the
working system and always there was some thing on the back of the mind of many survivors. But there was another
loyal group. Always ready for taking up the challenge and initiative. They were willing to have employee friendly
strategies. They were customer focused. They exhibited the constructive attitude and were willing to accept and face
the challenge. Their response was more active and progressive. Though it was perceived by some of them that they
may have to leave tomorrow, they were found to be confident to get some employability and were ready to craft
their future. They had a belief that there can not be life time guarantee of any job. Thus create own value and love
the job, develop the skills and be more pragmatic towards career. Be an entrepreneur in their own work function.
Love thy job was the dictum. The Rules-In-Use or DNA differentiates total production system (TPS) in lean from
other production systems. In short, there are three rules for Design and Operation, and for two rules for improvement
which are the guiding tools.

Rule 1: Design and perform each activity so that it is structured and self-diagnostic. Make every employee aware of
the system.
Areas: IE Time and Motion Study; Standard work; Visual Aids; Value Stream Map
Rule 2: Design and operate each customer-supplier connection so that it is direct, binary and self-diagnostic. Be
customer focused.
Areas: Kanban; Leveled Scheduling etc.
Rule 3: Design and operate the flow-path for every goods and every order to service and information to be give or
generated so that it is simple, pre-specified, and self-diagnostic. Trouble shooting is built in with decision taking.
Areas: U-shaped Cell, 5S, Visual Aids; Andon Signal

Improvement issues
Rule 4: Improve and solve problems regarding activities using scientific method, under the guidance of a teacher
(Sensei), as the lowest possible level in the organization.
Activities: QCC, Kaizen Event; TPM
Rule 5: Improve and solve problems regarding connections and flow-path using the scientific method, under the
guidance of a teacher (Sensei), as the lowest possible level in the organization.
Areas: 5W; Ishikawa Diagram; Jidoka; Taguchi DOE

The key is the line workers who are doing improvement work under the expert guidance of a Lean Sensei and being
fully supported by top management. Besides that, scientific method such as hypothesis, test and verify the
problems/results/improvement plans are an intrinsic part of TPS. Perfection is the ultimate goal of lean journey,
starting from
Customer Value >> the Value Stream >> Flow >> Pull >>Perfection

6.0 Avoiding Negative Influence

Negative reactions to psychological contract violation might be mitigated to some extent through good working
relationship--the relationship between the boss, the co-worker, peers and the management as a whole. Transparency
in the work and related explanation; clarity of expectations from every individual helps bring the cohesiveness.
”TRUST” is the solution. The value stream of leader, who follows the “walk your talk ‘is the star player and
performer in this game. The true leadership lies in transparent working, sincere efforts and integrity to group.
Involving the members in taking decisions also helps in gaining trust. But what is more important is to ensure the
speed and effectiveness with which the adaptation of the survivors is made in new environment. The symptom –
focused strategies which include social support have to be strictly adhered to. There should be no dispute between
the decisions and action taken .This is one of the most bothering aspects and needs to be handled very critically in
India. The employees who work on programme focused approach are usually supported by the top management.
Over all, very careful planning is essential before launching lean in Indian industry.

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7.0 Lean Manufacturing Case Study

7.1 Mechanical hydraulic component parts

This implementation case study is a real company with real people. For confidentiality, it is called "Mechyd",
though that is not their name. When Mechyd was founded ten years before around 1985, it was highly successful
and made large volume orders with limited variety. Over the years, markets changed and the product mix became
increasingly varied and with much smaller orders. The increasing variety demanded increasing overhead in terms of
engineering, material handlers, salespeople, production control, and a host of other tasks. The traditional accounting
allocations tended to assign too much overhead cost to high volume products and not enough to low volume. This
had, in turn, led to more low-volume orders and fewer high-volume orders. But these effects were so slow in
developing that they went unnoticed. Now, Mechyd was in trouble. Profit margins were low and market share
declining. Delivery was not competitive. A task force was formed. They taught, learned, experimented. As always,
paradigm changes are difficult and frustrating; Mechyd was no exception.

In the end, five work cells were in place and a macro layout showed the locations of remaining cells. Training was
well along and teams were developing. Supervisors were learning to deal with the cell environment. Mechyd carried
on this work in the years that followed.

The organization had internalized the lessons and spirit of Lean Manufacturing.

Element Original Situation Changes

Products were built on long, high-speed assembly
lines. Separate sub-assembly areas were
Work cells & allocated. Sub assemblies were built up prior to
Flow Layout running the order on the line.
A hierarchy existed in the factory that was largely
based on organization structure. At the very top
were design engineers. Then Quality assurance,
Inspectors, Process engineers, Machine
Operators, and Assemblers in that order.
Teams
Scheduling was done on an MRP system. This
was partly on software support. Moreover, the
system was not trusted due to a lack of data
integrity.
Lean
Scheduling
Identified product families based on commonality of parts
and tooling. Cells were then designed, each cell capable of
operating with 1-5 workers. Almost all operations,
including subassembly, are now internal to the cells. Raw
material flow is controlled by cell. Kit issue system was
established.
Teams were formed for each work cell. They had training
in SPC and problem-solving. Nevertheless, because of the
cell design; the teams quickly bonded and generally work
well together. Not all could be absorbed in team. Teams
performance (DFM) design, manufacturing processes,
Quality Assurance, and commercial purchasing from
approved vendors and developing sub contractors
functions. The team was totally dedicated to a specific
process for the value stream to flow smoothly and
efficiently. Cross functional team formation. Developed
guidelines and the best practices .Packaging which had
previously been in a different department no longer existed
as it was the part of the team. The packers were shifted
elsewhere and some were laid off.
Initially, the MRP system was simply bypassed. Kanban
stock points were set up for repetitive components. Two
bin system was also introduced for hardware. Some
repetitive end-products were used at Kanban stock point in
Finished Goods. Low volume or intermittent products were
built to order. Proper documentation was done. Several
months later, the MRP system was replaced. Because
Mechyd now had the experience to know what was needed,
the new MRPII was very Successful. The function had
become the school for every one. Cross functional
development and the production teams were empowered
oversee routine production and inspection. Trouble

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 Proceedings of the National Conference on
Trends and Advances in Mechanical Engineering,
YMCA Institute of Engineering, Faridabad, Haryana.., Dec 9-10, 2006.

shooting was a part of that.

To minimize major changeovers, orders were
grouped by similarity and had to be run in
sequence. This complicated scheduling created
WIP, excess finished goods and introduced wide
variability into the lead time.
Rapid Setup
Quality consisted of a final inspection at the end
of each high-speed line. By the time defects were
caught, all of the subassembly work was complete
Six Sigma and many items were in final assembly.
Moreover, there were 1-5 people working on the
line and stopping it to fix the quality problems
was disastrous for productivity.
The plant was well laid WIP and tooling was
accounted. Aisles were well marked.
5-S
1) The work cell configuration limits the number of
different fixtures within a cell and thus reduces the number
of setups. The set up was fully modular.
2) The firm's Tool & Die shop consolidated multiple
operations onto a single die-set for some products. Other
modifications helped in speed setups.
3) Cell workers perform setup operations
4) Poka-yoke was always followed.
5) JIT was very strictly implemented.
Cell teams inspect their own work after training in
blueprint reading, SPC, and measurement. Former
inspectors audit quality occasionally, setup SPC charts, and
monitor SPC activities. In the first cell, quality improved
by more than 90% within the first few days.
Following the initial re-arrangements, the firm spent some
time in reorganizing work at the detail level. The
disappearance of WIP and JIT introduction freed space.
Floors were painted; teams clean their work areas every
day. This factory looks and feels World-Class. The
collaborator vanished from the scene but our unit survives
today.

8.0 Lean Indicators Where the Teams Worked

1. House keeping
2. Layout space utilization
3. Visual work space
4. Right size equipment
5. Waste reduction
6. Single piece flow
7. Process mapping
8. Tact time pace, set up time
9. Pull system
10. Team working
11. Multi-skilling
12. Improvement activities
13. Reaction to errors
14. Root cause analysis.

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 .

Source Harvard Business Review March-April 1994 Figure 3

9.0 Conclusion
A concerted effort is put by companies across the industrial landscape to embrace the lean enterprise. An economy
dominated by lean enterprises continually trying to improve their overall productivity ,to increase market share, to
improve speed to market with new product - flexibility, to reduce manufacturing and engineering labor costs, to
eliminate non value added operations and processes, and customer responsiveness. An enterprise also draws up a
code of behavior to keep its member in line. Finally, an organization achieves the sustainable advantage.( Figure 3)
It is the competitiveness which do not crumble to competition. As every company cannot preserve the job, the
solution is a career path that alternates between concentration on a specific value stream (a family of products) and
dedicated intense knowledge building within functions. These functions include a” new process management
function” that instills a process perspective in every one from top to bottom. This means continually integrating
training i.e. learning into decision making system of the company. This also leads to employment stability

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